In Sacramento today, the state's independent legislative analyst released budget projections for the next fiscal year. They look a lot worse than they did a few months ago. California will need to close a $10 billion gap to balance the budget. KPCC's Julie Small crunches the numbers.
Julie Small: Back in June, Governor Schwarzenegger boasted that California would end the fiscal year with $4 billion in reserve. Since then, the housing market's slumped and sub-prime lending's spiraled into crisis. Those are two main reasons California's likely to end the fiscal year $2 billion in the hole.
The state's Legislative Analyst, Elizabeth Hill, said next year California faces an $8 billion shortfall, because spending is growing faster than revenues.
Liz Hill: In terms of the perspective, this isn't as significant a shortfall as certainly the legislature faced right after the high tech decline in the Silicon Valley. But nonetheless, $8 billion is more than the University of California budget and CSU budget combined. So we're talking big dollars to close this type of gap.
Small: Hill said the one-time budget solutions lawmakers favor – like leasing the California lottery to a private operator – won't solve the problem.
Hill: The key thing to remember is all the easy solutions are gone. And so, to get revenue and spending lines into balance will require some really tough choices.
Small: Hill suggested that California might re-think Governor Schwarzenegger's plan to pay down one-and-a-half billion dollars in debt about a decade early. She said that's like paying a double mortgage when you can't find the cash to cover the utility bill.